EUR/USD – 4H.
As seen on the 4-hour chart, the EUR/USD pair fell to the correction level of 50.0% (1.1030). During the whole working week, the euro/dollar pair fell relentlessly and fell by 140 points in total. A new downward corridor has been built, which eloquently indicates a “bearish” mood among traders. The rebound of the pair from the Fibo level of 50.0% will allow traders to expect a reversal in favor of the euro currency and some growth in the direction of the correction level of 38.2% (1.1066). Today, the divergence is not observed in any indicator.
The calendar of events of the European Union and America on November 8 does not list a single interesting economic report, not a single speech. Thus, traders are not affected by the information background today. It is still missing for the currency pair. Based on this, nothing supernatural can be expected from the pair today. Most likely, the trading of the first week of November will end on a calm note, a small pullback is possible due to the rebound from the correction level of 50.0% (1.1029). But what exactly no one expects is an increase in the activity in the remaining 9-10 hours of trading.
On Friday, as usual, you can sum up the week, which turned out to be frankly boring, but this did not prevent traders from getting rid of the euro for all five days. On Monday, we witnessed weak reports on business activity in the manufacturing sectors of Italy, Spain, Germany, France, and the entire European Union, which does not give much reason for optimism to bull traders. On Tuesday, an unexpectedly strong increase in the US ISM services PMI sparked demand for the dollar. On Wednesday, the indices of business activity in the services sector of the European Union did not disappoint, but “passed by” traders. On Thursday, the European Commission lowered its forecasts for GDP and inflation in the EU for 2019, 2020, and 2021. And that’s where the flow of economic data dried up.
What can be said about all these reports? The only figures that could cause demand for the European currency were not taken into account by traders. This suggests that the mood of the market is really “bearish”. So “bearish” that even information that can lead to the growth of the euro is not taken into account. But the information that leads to a fall in demand for the EU currency is taken into account. Perhaps the most disappointing was the information about the decline in forecasts for inflation and GDP. Given the fact that such organizations (the IMF, the European Commission, the ECB, the Fed) never try to give a forecast ahead, that is, given the most negative scenarios, in reality, the figures can be even worse than the European Commission assumes. And it assumes 1.2% inflation. Consequently, the real numbers will be much worse, and the forecast can always be changed to even lower. Well, accordingly, for the euro currency, this does not mean anything good. Based on such figures, the European Central Bank will again have to think about how to stimulate the economy, how to stimulate investment, how to stimulate industrial production, how to prevent the fall of the labor market. Accordingly, there will again be a question of easing monetary policy, which again can reduce the demand for the European currency. And there was no disappointing news from America this week. The impeachment of Trump, trade negotiations with China are very interested in traders but are not reflected in the chart of the euro/dollar pair.
Forecast for GBP/USD and trading recommendations:
On November 8, traders are likely to finish selling the European currency near the correction level of 50.0%. Closer to the second half of the US trading session, I expect a pullback up, based on the closure of some positions before the weekend. The information background for the rest of the day is zero. Nevertheless, the closing of quotes below the level of 1.1030 will allow the pair to sell with a target of 1.0995.
The Fibo grid is based on the extremes of October 1, 2019, and October 21, 2019.
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